Notice2023-20425
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Amend the Short Term Option Series Program To Permit the Listing of Two Wednesday Expirations for Options on Certain Exchange Traded Products
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 21, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 182 (Thursday, September 21, 2023)</title>
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[Federal Register Volume 88, Number 182 (Thursday, September 21, 2023)]
[Notices]
[Pages 65208-65210]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-20425]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98409; File No. SR-ISE-2023-11]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove Proposed Rule
Change To Amend the Short Term Option Series Program To Permit the
Listing of Two Wednesday Expirations for Options on Certain Exchange
Traded Products
September 15, 2023.
I. Introduction
On May 31, 2023, Nasdaq ISE, LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the
Exchange's short term option series program (``Short Term Option Series
Program'') in Supplementary Material .03 of Options 4, Section 5
(Series of Options Contracts Open for Trading). The proposed rule
change was published for comment in the Federal Register on June 20,
2023.\3\ On August 2, 2023, pursuant to section 19(b)(2) of the Act,\4\
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ The Commission did not receive any comments. The Commission
is instituting proceedings pursuant to section 19(b)(2)(B) of the Act
\6\ to determine whether to approve or disapprove the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 97719 (June 13,
2023), 88 FR 39876 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 98040, 88 FR 53569
(August 8, 2023) (designating September 18, 2023, as the date by
which the Commission shall either approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change).
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change \7\
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\7\ For a full description of the proposed rule change, refer to
the Notice, supra note 3.
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Currently, the Exchange may open for trading series of options on
certain symbols that expire at the close of business on each of the
next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively,
that are business days and are not business days
[[Page 65209]]
in which monthly options series or Quarterly Options Series expire
(``Short Term Option Daily Expirations'').\8\ The Exchange proposes to
expand the Short Term Option Series Program \9\ to permit the listing
of two Wednesday expirations for options on the United States Oil Fund,
LP, United States Natural Gas Fund, LP, SPDR Gold Shares, iShares
Silver Trust, and iShares 20+ Year Treasury Bond ETF (collectively,
``Wednesday ETP Expirations'').\10\
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\8\ See Supplementary Material .03 to Options 4, Section 5.
Currently, the Exchange may list no more than a total of two Monday
and Wednesday expirations on the iShares Russell 2000 ETF (``IWM'')
and no more than a total of two Monday, Tuesday, Wednesday, and
Thursday expirations on the SPDR S&P 500 ETF Trust (``SPY'') and the
Invesco QQQ Trust (``QQQ''). See Table 1, Supplementary Material .03
to Options 4, Section 5.
\9\ Options 1, Section 1(a)(49) provides that a Short Term
Option Series means a series in an option class that is approved for
listing and trading on the Exchange in which the series is opened
for trading on any Monday, Tuesday, Wednesday, Thursday or Friday
that is a business day and that expires on the Monday, Tuesday,
Wednesday, Thursday, or Friday of the following business week that
is a business day, or, in the case of a series that is listed on a
Friday and expires on a Monday, is listed one business week and one
business day prior to that expiration. If a Tuesday, Wednesday,
Thursday or Friday is not a business day, the series may be opened
(or shall expire) on the first business day immediately prior to
that Tuesday, Wednesday, Thursday or Friday. For a series listed
pursuant to this section for Monday expiration, if a Monday is not a
business day, the series shall expire on the first business day
immediately following that Monday.
\10\ The United States Oil Fund, LP, United States Natural Gas
Fund, LP, SPDR Gold Shares, iShares Silver Trust, and iShares 20+
Year Treasury Bond ETF are referred to collectively as the ``ETPs.''
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According to the Exchange, the Wednesday ETP Expirations would be
similar to the existing Short Term Option Daily Expirations in that the
Exchange may open for trading on any Tuesday or Wednesday that is a
business day (beyond the current week) \11\ series of options on the
ETPs that expire on any Wednesday of the month that is a business day
and is not a Wednesday in which Quarterly Options Series expire.\12\
And like Short Term Option Daily Expirations, in the event that
Wednesday ETP Expirations would expire on a Wednesday, and that
Wednesday is the same day that a Quarterly Options Series expires, the
Exchange would skip that week's listing and instead list the following
week; the two weeks would therefore not be consecutive. Options on each
of the ETPs with Friday expirations would continue to have a total of
five Short Term Option Expiration Dates, provided those Friday
expirations are not Fridays in which monthly options series or
Quarterly Options Series expire. The interval between strike prices for
the proposed Wednesday ETP Expirations would be the same as those for
the current Short Term Option Series for Friday expirations applicable
to the Short Term Option Series Program.\13\ As is the case with other
equity options series listed pursuant to the Short Term Option Series
Program, the Wednesday ETP Expirations series would be p.m.-settled.
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\11\ The Exchange proposes to clarify the rule text in
Supplementary Material .03 to Options 4, Section 5 to specify that
it can list two Short Term Option Expiration Dates beyond the
current week for each Monday, Tuesday, Wednesday, and Thursday
expiration. Consistent with the current operation of the rule, the
Exchange states that if it adds a Wednesday expiration (``Wednesday
Expiration'') on a Tuesday, there would be three outstanding
Wednesday Expirations at one time. See Notice, supra note 3, 88 FR
at 39877, n.4.
\12\ See id. at 39877.
\13\ The Wednesday ETP Expirations would have a strike interval
of $0.50 or greater for strike prices below $100, $1 or greater for
strike prices between $100 and $150, and $2.50 or greater for strike
prices above $150.
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In support of its proposal, the Exchange represents that it has an
adequate surveillance program in place to detect manipulative trading
in the proposed option expirations, in the same way that it monitors
trading in the current Short Term Option Daily Expirations.\14\ The
Exchange also represents that it has the necessary system capacity to
support and properly monitor trading in the proposed new
expirations.\15\ Additionally, the Exchange states that it does not
believe that any market disruptions will be encountered with the
introduction of these proposed option expirations.\16\ The Exchange
currently trades Short Term Option Daily Expirations on SPY, QQQ, and
IWM, including Wednesday Expirations, and states that it has not
experienced any market disruptions nor issues with capacity.\17\
Further, the Exchange provides data comparing the ETPs to SPY, QQQ, and
IWM, which have Wednesday Expirations today.\18\ According to the
Exchange, the occurrence of the ETPs moving through at least one strike
price after the close of trading has been less frequent than for SPY,
QQQ, and IWM. In addition, the average annualized closing volatility in
the last thirty minutes of trading for the ETPs has historically been
lower than that of SPY, QQQ, and IWM.\19\ Finally, the Exchange states
that the ETPs trade within ``complexes'' where, in addition to the
underlying security, there are multiple highly-correlated instruments
available for hedging.\20\ Therefore, the Exchange believes the
proposal would not be a strain on liquidity providers.\21\
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\14\ See id. at 39884.
\15\ See id.
\16\ See id.
\17\ See id. at 39878.
\18\ See id. at 39882-83.
\19\ See id. at 39883.
\20\ See id. at 39884.
\21\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-ISE-
2023-11, and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to section
19(b)(2)(B) of the Act \22\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
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\22\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to section 19(b)(2)(B) of the Act,\23\ the Commission is
providing notice of the grounds for disapproval under consideration. As
described above, the Exchange has proposed to expand the Short Term
Option Series Program to permit the listing of Wednesday ETP
Expirations. The Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to, the
proposed rule change's consistency with the Act, and in particular,
section 6(b)(5) of the Act, which requires, among other things, that
the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.\24\
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\23\ Id.
\24\ 15 U.S.C. 78f(b)(5).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the
[[Page 65210]]
proposal. In particular, the Commission invites the written views of
interested persons concerning whether the proposed rule change, is
consistent with sections 6(b)(5) or any other provision of the Act, or
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of data, views, and arguments, the
Commission will consider, pursuant to Rule 19b-4 under the Act,\25\ any
request for an opportunity to make an oral presentation.\26\
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\25\ 17 CFR 240.19b-4.
\26\ section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (Jun. 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by October 12, 2023. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
October 26, 2023. The Commission asks that commenters address the
sufficiency of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9ceee9f0f9b1fff3f1f1f9f2e8efdceff9ffb2fbf3ea"><span class="__cf_email__" data-cfemail="e092958c85cd838f8d8d858e9493a0938583ce878f96">[email protected]</span></a>. Please include
file number SR-ISE-2023-11 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-ISE-2023-11. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-ISE-2023-11 and should be
submitted by October 12, 2023. Rebuttal comments should be submitted by
October 26, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-20425 Filed 9-20-23; 8:45 am]
BILLING CODE 8011-01-P
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